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You should not rely on this booklet for legal advice. It provides general information only.
You owe money (January 2010)
How do collection agencies work?
How does BC law protect debtors?
What is harrassment?
How can I communicate effectively with my creditors?
If you are having debt problems, a collection agency may contact you to get payment. While they have a right to do so, it doesn't mean you have lost your right to be treated fairly. Understanding how collection agencies work and your rights under the Business Practices and Consumer Protection Act is an important step in solving your debt problems successfully.
If you’re in debt and have fallen behind in your payments, you may have received phone calls or letters from a debt collection agency demanding payment.
A debt collection agency collects debts for others for a fee. If you bought a suit from a local store and haven't made the payments, the store owner may eventually give up on you and hire a debt collection agency to collect the money from you. Normally the debt collection agency charges the creditor (in this example, the credit card company) a fee that is a percentage of the amount they actually get from you. If the collection agency gets nothing from you, they get no fee, so they have the reputation of being aggressive in their collection tactics.
The law permits a collection agency to phone you in their efforts to collect the money you owe. However, the law also protects you from harassment by putting limits on how often, where, and when the agency can call you.
The collection agency can also warn you of possible courses of action they will take to collect the debt, such as taking you to court. This is not harassment since a creditor has the right to sue you for debt. If this happens, and a judge decides that you could have paid your debts but didn’t make payments, you might also have to pay court costs in addition to your debt.
Usually, it is in your best interest to work with the collection agency and/or your creditors rather than be taken to court.
Although collection agencies do not give credit, in some cases they may be willing to discuss repayment plans. You will likely be required to give your detailed financial information (all sources of income and all monthly expenses) in order for the payment plan to be considered. If you and the collection agency agree to a payment plan, ask for confirmation of the agreement in writing before sending them the first payment.
For example, if you owe $1,000, you and the collection agency could agree to a payment plan of $100 a month for ten months.
In some cases, a collection agency may be prepared to settle for less than the total amount you owe. If you are offered a settlement or have accepted one, the collection agency should send you a letter confirming the settlement arrangements before you are required to pay the settlement amount. Do not pay the settlement amount until you receive the confirmation letter. Also, they need to agree to report the debt as “settled in full” to all credit reporting agencies once all of the agreed payments have been made.
How does BC law protect debtors?
In the past, debt collection practices weren’t regulated by any laws. Not surprisingly, this led to abuses, including midnight phone calls demanding payment, complaints to a debtor's employer about the debt, and threats of terrible consequences.
The BC government passed the Business Practices & Consumer Protection Act in order:
- to license debt collection agencies
- to regulate the behaviour of creditors and debt collection businesses.
The Act recognizes that creditors have a right to collect money owing to them, but it also recognizes that debtors should be protected from harassment.
Harassment is defined in the Business Practices and Consumer Protection Act as:
- using threatening or intimidating language
- using excessive or unreasonable pressure
- publishing or threatening to publish the debtor’s failure to pay what they owe.
A collection agency cannot:
- Collect or try to collect money from you if you dispute the debt or if you have proof that you're not responsible for the debt. In a dispute, you must take action to fix the outstanding issue. The collection agency only has the information about the debt that the creditor provides. If this information is not correct, it is up to you to contact the original creditor to try to fix the problem. For example, if you were the victim of identity theft and the thief ran up $10,000 on your credit card, you could legitimately argue that this is not your debt.
- Collect or try to collect more money than you owe. However, you will likely pay interest on your debt for as long as it exists even if you are making payments.
- Try to collect money from you without a proper license. All collection agencies must be licensed and bonded under the Business Practices and Consumer Protection Act if they are collecting in British Columbia, no matter what province or country they are calling from.
- Phone you collect or ask that you send the money in a way that would cost you money, i.e. wire transfers, etc.
- Take or try to take things you own to pay off your debt without taking the matter to court and getting a court judgment against you. For example, they cannot seize furniture, or any other property without a court order.
What is harassment?
The law prohibits collection agencies from harassing debtors. They cannot:
- Threaten you with something that has nothing to do with the collection of the debt
- Make abusive calls in which they lose their temper and swear at you or use other verbal abuse
- Talk to your employer without your permission, unless it's to confirm your employment
- Talk to you, your family or your employer in a way that will humiliate or distress anyone
- Call you more than once a day or at unreasonable hours (for example, late at night)
- Give you a document that is made to look like an official court document when it isn't.
How do I deal with harassment by a collection agency?
If a collection agency is treating you in a rude, threatening or harassing manner, there are some things you can do to protect yourself. The government can suspend or cancel a collection agency’s license if they break the law. The government can also prosecute them in court.
If a collection agency is harassing you, you should:
- Write down details of the phone conversations or events that you believe are harassing. Note the date and time of the call, the name of the company and collector involved, and as many details as possible of the nature of the call to describe the harassment.
- Use the *57 call trace program available free through TELUS to notify the phone company of the calls. This is done by hanging up, lifting the handset, then pressing *57. TELUS Security records the caller's number, your number and the time and date of all calls traced using *57.
- Contact Consumer Protection BC at 1.888.564.9963 for the name of the complaints manager who deals with the collection agency that is harassing you. Consumer Protection BC gives the complaints manager the power to work towards fixing your complaint, including possible disciplinary action against the collection agency. You can also submit a written complaint by going to www.consumerprotectionbc.ca/index.php/consumers-debt-collection/how-to-make-a-complaint.
If the nature or number of phone calls is upsetting you and the agency won’t stop, you have the right to demand in writing that all future contact with you be in writing only. The agency is violating the law if they don’t respect your request. You should put your request in writing and keep a copy for your records.
If you disagree with the debt, you can notify the creditor and collection agency that you dispute the debt and want the creditor to take the matter to court. If you give written notification of this, all other types of collection must stop. You should keep a copy of your letter or email for your records.
Student loans
If you are having problems with collection activity on your student loans, try the Federal Student Loans Compliance and Complaints office at 1.800.667.0135 or the provincial office at 250.387.6100 or 604.660.2610. | How can I communicate effectively with my creditors?
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Sometimes, even when we try our best, we aren’t able to make payments to our creditors as we had originally planned. This may be due to a variety of reasons, such as losing your job, an unexpected rent increase, or an illness. |
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Here are some tips to help you talk more effectively with your creditors:
1. Start by figuring out what income you do have. Include all of your current sources of income including wages, disability assistance, social assistance, a family member’s or partner’s income, gifts, child tax credits / benefits, pensions, old age security, GST refunds, etc.
2. Figure out all of your expenses on a weekly, monthly, or seasonal basis. Make sure you remember to include personal expenses, such as restaurant meals or gym memberships, and household expenses, such as rent, groceries, cable, and utilities. |
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3. Consider what assets (property, investments) you have that may be at risk. If you get behind with your payments to your bank, they may take money from your bank account or investments to pay towards your debt. If you are taken to court and lose, the court could order that your assets be sold in order to pay off your debts, including your home, vehicle, and any other valuables. |
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4. You also need to figure out the nature of your debts: are they shared with anyone? Are they co-signed or guaranteed by a family member or friend? Are they secured by real estate or property? Your inability to pay your debts may affect a family member or friend.
5. Once you’ve completed these steps, you should contact your creditors in writing. You need to provide enough information so that your creditors understand your financial difficulty. You should notify them that you would like to settle your debt but cannot do so in full right now. You could offer to pay them an amount you can afford if you have the money to do so. You can do this on a regular basis but should only continue to do so if you can afford a monthly payment. If you have to stop making payments, let your creditors know about your financial situation and that you will update them when it changes.
If you have specific problems that are preventing you from paying your debt, such as health issues or job loss, you should provide proof, such as: |
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• a letter from your doctor if you have a health situation or disability that is affecting your income
• documents explaining changes in your employment status, e.g. reduced hours, job loss or termination of Employment Insurance benefits
• documents showing a change in your family or marital status, such as a new child or that you are now taking care of an elderly parent. |
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6. Make a list of the address, phone and fax number for each creditor or collection agency. Be sure to get the name of the person / supervisor you have been dealing with at each company. Confirm which debt they are trying to collect on to make sure that two agencies aren’t trying to collect on the same debt.
To stop the collection phone calls, you need to follow through on what you say you will do. You also need to respond to letters from your creditors. Communicating honestly and updating your creditors about your situation is very important in this process.
7. Once you’ve written a short letter to explain your situation, attach any relevant documents and the summary of your budget. Then fax or mail it to your creditors or collection agents by registered mail. You want proof that they received it. Get proof every time you mail or fax anything to them and keep your receipts organized.
If you speak with someone to give them an update about your situation, write down their name, number, the time of call and what was discussed. You may need to show these documents in the future. Follow up any phone calls with something in writing if possible.
If the person you were talking to suggested a payment plan or special circumstances, ask them to send it to you in writing. Verbal agreements are difficult to prove. You can take the time to consider a written offer more carefully than if you are on the phone with someone. It’s important to only agree to what you are reasonably able to do – don’t get caught up in the heat of the moment.
For more information, contact Consumer Protection BC at www.consumerprotectionbc.ca/. You can also call them at 604.320.1667 in the Lower Mainland or 1.888.564.9963 (toll free in BC).
You can also contact the Credit Counselling Society at www.nomoredebts.org/. They have helpful information on how to communicate with your creditors, including sample letters. You can call them toll-free at 1.888.527.8999.
Many thanks to the Credit Counselling Society for reviewing this document. |
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